Ladies and gentlemen, good day. Welcome to the TeamLease Services Q1 FY 2024 Earnings Conference Call, hosted by ICICI Securities. We have with us today Mr. Ashok Reddy, MD and CEO, Mr. Sunil Chemmankotil, CEO, Specialized Staffing, Mr. Kartik Narayan, CEO, Staffing, Ms. Ramani Dathi, Chief Financial Officer, and Mr. Kunal Tharad, Head, Investor Relations. We will start off with the remarks from management, after which we will open the floor for our Q&A session. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to the TeamLease Management. Thank you, and over to you, Mr. Reddy.
Thank you very much, and good evening, everyone. I think we ended the quarter on a strong note from a revenue growth perspective. At the group level, the revenue grew by 7% quarter-on-quarter and 16% year-on-year. This is largely driven by a strong uptick in the general staffing business in net headcount. We've added about 13,000 headcount in Q1, taking the total billable headcount to a little over INR 2.37 lakh. The staffing revenue grew 8% quarter-on-quarter. I think the downside of headcount from the apprenticeship continues to play out. This is the NIM numbers that we said would kind of sunset over three quarters. We did have a trainee headcount drop of about 8,000 in Q1 on that front.
You know, there will be some more that will drop out over the coming two quarters. Happily, we have started seeing green shoots in other elements of the service offering and products where we bring trainees on board under the DA business, which should start seeing some traction in the coming quarter. In the specialized staffing also, the headwind continues to be there with limited number of open positions and decline in the net headcount of associates. However, we have managed to sustain revenues and the profit levels at the specialized staffing business despite the headcount waiting to see a turnaround in the external market condition.
There is a seasonality in the EdTech business, coupled with also the IT training element going slower as an overall industry sentiment, and that has impacted the revenues and profits for that segment in Q1. I think overall, the drop in sequential EBITDA is on account of the NIM headcount loss, the seasonality in EdTech, and the core employee annual hikes. I think overall, with our improved sales and hiring capabilities, the General Staffing business is on a strong growth trajectory, waiting for a turnaround in the specialized staffing, macro trends for the open positions, and growth to come back.
I think as the NIM headcount transitions out over the coming two quarters, we will start to see green shoots in the aspect of the other elements of areas that we bring trainees on board. With that, I will have my colleagues give an update and then follow it up with questions. Kartik, on the staffing side.
Yeah. Thank you, Ashok. Good evening, everyone. I'm pleased to share the highlights of our Q1 FY 2024 performance. During the quarter, as Ashok mentioned, we witnessed notable progress in general staffing, with a net addition of nearly 13,000+ associates, which is the highest number recorded in the last six quarters. We experienced a 6% quarter-on-quarter incremental growth in headcount, an 8% quarter-on-quarter in revenue, and 18% year-on-year, reflecting the positive momentum in our business and the market as well. We continue to grow with our larger customers, which means we're seeing pricing efficiency for volumes, impacting our average realization of PABM. Our PABM is flat quarter-on-quarter, dropped about 2.5% on a year-on-year basis.
That said, we are innovating and doing several things for cross-selling and upselling, and we are seeing some green shoots. The full revenue impact and difference would need a little bit more time for it to actualize. The BFSI or the finance and consumer business verticals continue to show promising growth, and we anticipate further opportunities in this area. Although there was a degree of slowdown due to unseasonal rains in some parts of the country, which impacted the consumer business, overall growth has been driven by the formalization in large FMCG companies. This highly fragmented nature of the staffing market, we understand customers have choices. What we have seen these past two quarters is the return of customers who appreciate our strength, especially in statutory compliance, apart from hiring and technology that we bring to the table.
Needless to say, some amount of consolidation is inevitable in this market, and an increasing push of compliance and optimization. The question really is when, rather than why. Financial services and consumer goods are two top segments, from a base perspective, and in also in terms of absolute growth, and associate count, closely followed by retail and telecom. Both consumer goods and FMCG achieved growth rates of over 7% and 6% respectively, in terms of associate growth compared to the previous quarter. Our sales effort resulted in 42 new logo sign-ups, primarily in the retail, consumer, and FMCG segments. Another interesting aspect is we hired around 19,000 individuals during Q1 through our own sources, which is a 30% increase from the previous quarter.
32% of them were hired through non-recruiter channels, leading to a decrease of 11% in our cost of hiring as compared to Q4. Our FTE, or full-time equivalent, improved by 4%, driven by a 6% increase in our blueprint account. Our investments in digitization initiatives have shown some positive efficiency gains, allowing us to cater to a larger client base while maintaining our core employee set. Therefore, we witnessed a 2% reduction in our cost per associate quarter on quarter, indicating progress in our ongoing process improvements. As we move forward, we see positive signs around hiring in telecom, led by 5G growth, financial services in the services sector, as well as the FMCG and FMCG retail space. There are specific opportunities around manufacturing, led by government PLI scheme.
These open positions are heavy recruitment in non-metro locations. We are working on improving our inefficient capabilities, hiring in this sector. Looking ahead to Q2, we have a heavy pipeline, and see emerging demand across most of our customers. While the challenge in certain sectors persist, we believe in the opportunities presented by the continued urbanization in the consumer space, along with anticipated capacity increase in electronics manufacturing. Our focus remains on cost and execution, particularly in sales and hiring. The benefits of digitalization and process improvements are starting to manifest, and we are optimistic about the impact they will have in the future. Thank you so much, and over to Sunil.
Thanks, Kartik. Good evening, everyone. From the specialized staffing perspective, most of the customers have slowed down on hiring and are focused on improving the utilization factor through effective capacity utilization rather than adding headcount. Even the replacement hirings have been very selective of late. The open demands continue to hover around 40%- 50% of what we used to service earlier. While we have witnessed a huge drop in requirements from IT services customers, we saw some green shoots with global capability centers and non-tech clients. However, the volumes are not very comparable. Anticipating a prolonged slowdown in tech hiring, we had embarked on cost rationalization activity from end of last fiscal. The impact of the same continued in Q1, resulting in a much leaner team as per the current market conditions.
As a sales concern, we have won 13 new clients, out of which 10 are large clients. We have built a strong pipeline, and we expect to continue the sales momentum in the rest of the fiscal. We were able to mitigate the erosion of base in IT services clients through additions in the GCC and non-tech customer base, thereby maintaining the revenue numbers sequentially, while there has been a dip of 3% on year-on-year basis. Our headcount has dropped 3% sequentially and 15% on year-on-year basis. The substantial difference you see in headcount compared to last year is due to the fact that we let go a large telecom mandate, which was around 1,000 headcount in the last fiscal. Our headcount grew nominally by 2% sequentially, while on a year-on-year basis, we have a substantial dip of 26%.
Overall, economic downturn has affected hiring activities in the tech sector, leading to a decrease in the demand for our services. With prolonged uncertainty, our clients have taken a very cautious approach, and we understand that hiring will continue to be under pressure in the near term. In the previous year, we have undertaken a comprehensive review of our operations to identify areas where we can optimize cost and leverage technology, which has helped us to sustain the business. We shall continue to take adequate measures based on the business scenario going forward. We shall put in our best efforts to weather the current headwinds and deliver optimum results. Thank you.
Thank you, Sunil. Good evening, everyone. We have completed the buyback process in this quarter with a total cash outflow of INR 120 crore, including taxes. Also, during the quarter, we have received INR 36 crore of income tax refunds for assessment year 2021, taking the total cash balance to over INR 300 crore. Total outstanding TDS receivable as of date is INR 230 crore, including current financial year 2024. In terms of sequential performance, there are a few items which impacted the register. The main item is seasonal drop in the revenue and contribution of retail business by about INR 3.5 crore. Secondly, drop in mean headcount in PA business has contributed to a drop of INR 3 crore in net revenue. The last item is the annual employee hike, which is INR 202.7 crore in Q1.
There has been no increase in the overall funding head closure or capital employed across the businesses compared to last quarter. Operating cash flow conversion to a stand of 86% for the present quarter. FTE productivity in staffing has improved from 350- 355 on quarter-over-quarter basis. Core employee headcount decreased by 8% year-on-year, in line with the cost optimization measures taken up. Current quarter had 36 headcount reduction on core employee front. With a combination of business growth and initiatives on productivity and optimization, we expect steady improvement in absolute profits from Q2 sequentially and there on. Thank you.
We're good to go for the questions now.
Thank you very much, sir. We will now begin the Q&A session. Anyone who wishes to ask a question may press star and one on their telephone. If you wish to remove yourself from the question queue, you may press star and two. Our participants are requested to use handsets while asking your question. Ladies and gentlemen, please wait for a moment while the question queue assembles. We have the first question from the line of Mukul Garg from Motilal Oswal Financial Services. Please go ahead.
Yeah, thank you. Ashok, Kartik, you know, first on the general staffing profitability, how should kind of, you know, we see the profitability improvement measures play out over the next few quarters? If I see your aggregated numbers, the PABM has now, you know, is flat. I don't know whether it is stabilized or not, you know, how do you see that play out going forward? Your staff profitability has also improved, still there was a fairly big drop in margins. How should we see the margins play out over the next few quarters, and when do you expect them to kind of normalize their to historical levels?
If you can just help us understand, is there a kind of a, you know, kind of a choice which you have to take between growth and margins? Your growth in general staffing is, you know, fairly good. Margins are not following that. If you can just help to understand, is the growth coming at the cost of, you know, profitability?
Yeah. Thank you, Mukul. I don't think there's a choice to be made between growth and profitability, while clearly, as Kartik did call out, as some of the bigger customers or as big customers get bigger, there is a competitiveness on the PABM. However, you know, by virtue of a customer mix and some element of innovation on pricing, we have been able to hold the PABM across the quarter. There will be, and there is still competitive pressure on the PABM, and it's something that, as a conscious effort, Kartik has multiple things playing out at the PNL level, to sustain and grow as we go forward.
I think also from the technology, digitalization, productivity aspect, will continue to play out for the business, where the FTE ratio will improve and, you know, the overall cost to servicing will come down. I think at a margin level, it is largely from a perspective that wages are going up. At a percentage level, while we clearly do believe that with scale, absolute profit for the business will go up, at a percentage level, they are looking depressed, primarily as a function of wage levels and the flat PABMs. I think increased element of productivity, coupled with the portfolio coming to play, which is specialized staffing and DA, also starting to grow, is what would leverage the margins over a period of time.
If you really look at it, because DA has also, element of service from a common, end, the DA headcounts have been reducing. Like I called out, I think as we look at the NIM transitioning out over the coming two quarters, other, work vectors should start giving a net positive growth, towards the end of Q2 , that again, should start helping to improve the margin.
Understood. Thanks a lot for taking my question. I'll get back to you.
Thank you. A reminder to all the participants, anyone who wishes to ask a question, may press star and one. We have the next question from the line of Vidit Shah from IIFL Securities. Please go ahead.
Hi, good afternoon, thanks for taking my question. Just staying on the margins that you spoke about, just trying to understand the dynamics of the business here. You know, EBITDA of staffing and allied services fell from INR 29 crore to INR 25 crore, which is a INR 4 crore drop, and I think Ramu explained that about INR three and a half crore comes from the loss of the NIM apprentices. Shouldn't you also expect some offset from the 13,000- odd headcount that we added during the quarter, and, you know, expect, you know, the EBITDA to remain flat quarter-over-quarter? You know, ignoring the margins was just the absolute number.
Hi, Vidit. Yes, you are right. Sequentially, there is an INR 3.5 crore drop in the EBITDA of staffing segment, which is mainly driven by the mean headcount loss. That itself is an INR 3.5 crore impact, and on top of that, we have core employee appraisal pertaining to staffing segment, which is close to INR 2 crore. We got almost an INR 2 crore growth on this 13,000 headcount in net revenue, but that got negative with INR 3.5 crore from the mean business loss and INR 2 crore from core employee appraisal.
Okay. I understand INR 25,000 in the report, how much further in mean EBITDA there, that is potentially, you know, at risk?
We still have another 10,000 headcounts, and we are expecting that it can be completely phased out in the next two quarters.
That 10,000 headcounts would be roughly another INR 3 crore? Would that be right?
Yes, about INR 4 crore would be the incremental impact.
Okay. You know, if, given that you've streamlined the cost structure and, you know, the core employee increments are a one-time process, sequentially, can we expect any headcount multiplied by, let's say, INR 670 or PABM to be a straight addition to EBITDA or, you know, like, am I getting the math wrong somewhere?
Ideally, yes, because we are not planning to increase any head other than on the hiring front. Ideally, the net revenue should directly contribute to the EBITDA in the staffing business, excluding the DA impact.
Okay. Understood out there. Just if you could provide some outlook on the specialized staffing business? I understand there's been a prolonged level of weakness in the industry, but any signs of recovery that you're seeing and when do we, you know, expect this to recover by? The 13 new customers that we added, are these IT clients, non-IT clients, or what is the nature of the work that we're doing?
On the specialized staffing front, we still don't have a very clear understanding on how the market is going to pan out in the near term. However, you know, we are confident that on a long-term basis, IT has always been cyclical. We are anticipating that, you know, this downturn will very soon get over, and we will start seeing some kind of hiring. Because on one front, if you look at the utilization factor, most of the IT services companies have reached 85%- 90%. They're also bagging new deals. Under those circumstances, they might require more headcount additions to be done to deliver to those projects.
We are anticipating that maybe one or two quarters down the line, IT services companies will definitely start hiring. On the GCC front, we see that there are a lot of new GCCs coming into India, and they are hiring, but the volumes are not comparable with IT services, as I mentioned in my commentary. We are targeting to acquire a lot of these GCCs. Coming to the sales point, yes, logos are all GCCs, actually. We have been going behind the GCCs, and the seven large GCCs are potentially a very big opportunity for us to get the growth in the near term.
Okay. The margins of GCC are comparable to the tech companies?
GCC in terms of volumes, are not comparable with IT services, volumes. However, they come at a better rate and margin. What I meant is that we may not be able to match the headcount, but, you will see that the results also are reflecting that, you know, we are able to maintain the revenue despite losing some of the headcount.
If I can just add to what Sunil was saying. The element of outlook on the IT industry is at this point, still kind of muted, and I think that's kind of visible with what IT services companies have been calling out to market. We believe that this cyclicality will take some more quarters to turn around. The element of being prepared for when the market turns around with a larger client base, and your question about the new logos signed up, most of them are in the product slash GCC bucket. I think, while the absolute numbers will not be large, it is starting to work with them and building the traction on their requirements. These are specialized staffing rate card model, kind of mandates.
At least this is the current outlook on open positions and the new client sign ups. The view is that decline in numbers should get stemmed in Q2.
Okay, thanks so much for answering. I'll just thank you for more.
Thank you. Participants, you may press star one to ask a question. The next question is from the line of Gaurav Nigam from Tunga Investments. Please go ahead.
Yeah, thank you for taking my question. Sir, I know you've answered it previously. What is the PABM for general staffing and for the DA business for FY 23 and this quarter?
The PABM has been flattish for the last two quarters, Gaurav. For staffing business, it is currently at 680, and for DA business, there has been a decline because NIM is the highest PA contributor for us in DA business. Currently, it is at INR 550.
INR 550. Okay, margin also has been flattish?
Yes,
yes.
Okay, understood. if you don't mind-
The only thing, Gaurav, there is while it has been flat for staffing at INR 680, it is on a growing headcount. Next, on the GA front, the flatness comes with a lower headcount.
Got it, got it. Maybe just a second question on the GA business. What is the outlook for the, like, where we will end the year at? Is it like a declining business, will it go down to zero, or we are expecting it to, like, have some kind of, some employees will get retained on the GA?
I think, to the end of the year, we are clearly looking at a positive headcount, play, like I actually called out. Even the current trajectory of client acquisition in our NAPS, NATS and other, service areas, we should be able to net stem the mean losses in Q2 itself. Worse case, by end of Q2, and probably get into a positive trajectory from Q3. So from a larger PNL and headcount perspective in GA, we look to end on a positive note for the year.
Got it. This new GA business that you plan to acquire, will that be at a similar PABM or it will be different?
No, it will be at a slightly lower PABM, primarily from a perspective that, NIM was the highest margin, element of the business. This will be at a slightly lower.
Got it. Thank you, sir, for answering my question.
Thank you. Before we take the next question, as a reminder to all the participants, you may press star and one to ask a question. The next question is from the line of Ashish Chopra from Goldman Sachs Asset Management. Please go ahead.
Hi, thanks for the opportunity. Ramani, just wanted to check with you on the trajectory of absolute EBITDA, while you articulated that you expect it to grow. Another INR 4 crore of impact from this DA segment. I guess, increase of 13,000 also led you to a INR 2 crore incremental EBITDA. Could we see this kind of getting offset by DA over the next couple of quarters before the absolute EBITDA grows? Or if you could help us with the bridge of how do you move from offset to INR 4 crore going forward?
Ashish, this INR 4 crore will be spread over two quarters, and mainly in this quarter, we had exit seasonality, almost INR 3.5 crore. That will be gone from next quarter. Also the staffing, on staffing front, since we are not adding any further costs in the backend, except some marginal hiring-related direct costs. There should be a direct growth in EBITDA coming from net revenue or headcount addition. I cannot quantify the number, but, sequentially, there will be an improvement in EBITDA quarter-on-quarter from two onwards.
Okay, got it. Also wanted to just understand what's really happening in the specialized staffing margins. They are still below 7%, and you've got the core headcount down from 570 to 370, almost 29%. Any negative operating leverage is taken care of. You've let go of 1,000 employee associated telecom project as well, so that should have helped positively. You're increasingly winning more from GCC, IT services flow, which has better billings and margins, and yet the profitability is down from 9% to less than 7%. Despite all of this, how should we really think about this growing further, and what are the other levers that could be different?
It's really largely driven around the productivity, aspect, Ashish. I think the reality there is we have to maintain a certain headcount for the demand that is there, and the demand is only kind of replacing as well, what is being lost and again leading to a net growth. I think as demand comes to the table and the team is able to drive a higher productivity, we will be able to have the margin improvement come in. I think we could make a choice to reduce further headcounts and costs, but they have been retained on the back of expected demand and capacity, retention at our end. I think certain volume economies come into play, and I think that is really what has depressed margins and will adjust as demand comes back in.
Just lastly, from my side, could you just give us a ballpark estimate of what's the breakup of the specialized staffing headcount between IT services, GCC and non-tech?
Currently we have 37% is IT services, and we have non-tech around 13%, tech and non-tech, and balance is GCCs.
Got it. That's helpful. Thanks so much.
Thank you. The next question is from the line of Alok Deshpande from Nuvama Institutional Equities. Please go ahead.
Yeah, good evening, everyone. Two questions from my side. One, first starting with the general staffing. I want to understand the dynamics of, large into the festive season, et cetera. When do you first start seeing a build-up or interest from the clients in terms of, what sort of types of.
Sorry to interrupt, but your voice is not clear. I, couldn't get the question.
Is it better, Ashok?
Yes.
Okay. My question was on general staffing, when you start getting closer to the festive season, when do you start seeing interest from the clients in terms of what headcount you'll be needing, et cetera? What are you hearing, at least the initial indications from some of your clients which are, you know, more related to the festive season? Those are my first questions, sir.
Yeah. I think it's a little early for getting input on festive season from customers, because most of the festivals this year are coming into Q3. I think towards the end of Q2 is when organizations will start planning for the aspect of the festive season hiring. Having said that, I think, just independent of the festive season demand, Q1 did see a strong growth trajectory in the staffing headcount as a function of the verticals and clients that we are working with. Q2 also has a strong demand pipeline, and we believe ideally, Q3 should have it stronger, given the uplift from the festival hiring. As of now, we don't have the view on festival hiring outlook from the clients.
Sure, sure. That is exactly what I was getting at. I mean, we started the year very well with the addition. Just trying to figure out whether, you know, we can, you know, sort of finish the year or, you know, at 25,000-30,000 kind of addition. I mean, is that the number you're looking at?
Yeah. I mean, our belief is we should be able to, given the sustainability of demand over the quarters.
Sure. Ashok, my second question was, I mean, if you look at the last three to five years, you know, you have seen the trend of the PABM come down. Basically, you know, as you also mentioned, that as clients get larger, you know, they sort of look for slightly lower markups also. Historically, guys have always guided towards a 75-25 mix in terms of fixed PABMs and then 20-25%, which is variable. Given the trend in PABMs, is it fair to say that variable pricing is something where there is a lot of resistance from clients? Because we haven't seen that much to over time.
Yes, I agree with you on that. Because as we have been calling out, our transition from 100% fixed to being able to get 25% variable happened over a number of years. We've been able to sustain and hold at that 25%, but we've not been able to increase it. I think clearly from a sales agenda perspective, it is better for us to have a variable markup, primarily that it protects us from wage inflation element. I mean, Kartik is looking at trying to see how that can further get driven. Plus, I think, as he called out, we are trying to innovate on various other upsell, cross-sell opportunities, that hold or improve the PABM over the coming quarters.
Some of the initiatives, he has started taking live, early green shoot, play out. I think as we get to the latter part of the year, we should be able to comment more clearly on how those, interventions, innovations are playing out.
I may, one last question. Earlier, you know, you should do a number out in terms of what business you are doing in terms of where you for clear employees first, and then where you get the payment cases from the client. I think that was 85, 15, 85% and 15% or 87%. From where is that number right now
We now are at 40-60, where we do 40% of the hiring. As Kartik called out, last quarter, we did 19,000 hires. On an average, we are doing about 6,500 hires now, and we see that number steadily increasing as we go forward.
No, Ashok, I was referring to the part where you guys pay the salaries first, and then you get it from the clients as opposed to.
Still stays the same. There is still no major change on that front. About 13%, 14% is funded, about 86% is collect and pay.
Got it. Thank you. Very helpful. Thanks a lot, Ashok, I'll just go ahead and hang up.
Thank you. The next question is from the line of Vivek Sethia from HDFC Securities. Please go ahead. Mr. Sethia, I have unmuted your line. Kindly proceed with your question.
Hi, good evening, everyone. Just wanted to, you know, get a recap of the two points which you had mentioned earlier. I had missed out on this. The recruiting from non-recruiter channels and the net cash balance and ITR, if you could repeat those, then I will go forward with the next questions.
Sorry, Vivek, you were not clear on that question. Could you just repeat it?
The data point on net cash and the non-recruiter channels, like, as a percentage of total hiring.
Net cash, Ramani?
Yeah. On the net cash balance, as of June 2023, we are at INR 330 crore, out of which almost INR 280 is free cash. The remaining is working capital.
Yeah, Vivek, you know, like Ashok mentioned, I think the first metric is the overall hiring is gone up, which is that we are doing ourselves is 13k to 19k, which is from Q4 to Q1. The non-recruiting is 30% of that number.
Vivek, just to clarify on that, the cash balance of INR 330 crore is after the buyback payout of INR 130 crore. On top of this, we have TDS receivable of another INR 230 crore.
Got it. just to clarify, I guess in our last call, you had said that the non-recruiting channel is almost 52% of the associate hiring. Is that correct?
It varies, depending on the profiles and the industry that we are catering to, on this front, Vivek. It won't be the same. It, depending on the profile, it varies.
Okay. A couple of more questions I had. One was with regards to your client concentration. If you could provide that data as to how much the top ten clients contribute in terms of associate volume. If you could break down the total additions in terms of, like, the total new logos that you have acquired during the course of into small, medium, large, like in the last quarter. Also my third question, like, if you could throw some light on the HR services segment and how do you see that moving forward? Because this quarter it has reported a negative result, if I'm not wrong. Yeah, just those three questions.
I think, I don't have the immediate data point on the top 10 as associate numbers. At a revenue level, it's about 33%, and that has kind of stayed the same across the quarters. Not a big change on that front. I think from an HRTech perspective, there are three businesses in there. There is the segment of Regtech, Ed-tech, and HRTech. The Regtech business has been steady and has seen incremental growth. The HRTech has kind of been flattish over the period. The seasonality is really in the EdTech side, and there are two elements to that. One is the aspect of corporate training and university mandates.
Q1 is really not when admissions and renewals of students happen, and that leads to less of billing in Q1, which has been the track for the past few years, and that continues to play out. The second element is also, we do a lot of corporate training, especially in the IT area, and overall IT training budgets were lower and the training numbers have been lower. We started seeing some elements of attraction to mandates and requirements on that front. I think that will play out as we go forward. I think even on the university side, the Q2 should see a larger billing, and typically Q3 is normally their highest billing as a function of admissions and student renewals.
On the new logo acquisition, I think Sunil called out success by staffing, but in general staffing, it's been across various sectors. But BFSI, consumer, and industrial coupled with retail, have been the four verticals where we have really added new logos. Some of them have come in with healthy demand, and that should complement what Kartik called out earlier of his outlook for Q2 for head count growth
Oh, okay. Yeah. Just wanted to get a better understanding on the EdTech segment, like, if you could maybe, you know, give an understanding of how we see that moving forward in this year and maybe going forward the next few years. Obviously, year-wise, you know, we get to include the impact of seasonality. If you could, explain it that way as well, it would be great.
I think on the EdTech side, like I called out, there are two verticals or revenue streams. One is the corporate and one is the university side. On the university side, the seasonality of student intake and renewals are more or less skewed towards Q2 and Q3. And, you know, that will play out as we go forward. I think the key focus for us is to sign on more universities. Last year, we worked with about 26 universities. We are looking to add about 10-12 universities to that pool this year. And as we go forward, we will look to add more universities where we are providing the services and hence, the student numbers.
I think on the corporate training front, the trajectory is normally, there's no seasonality impact, but I think this time the impact is really purely from a perspective of the IT industry downturn and budget constraint. As that starts to open up, we should start seeing the element of revenue uptick happening there.
Yeah. In terms of growth on revenue, in EdTech business, year-over-year, on average, it's about 30% growth and at an EBITDA margin of 8%. The Q1 seasonality, if you take out the Q1 seasonality, the rest of the three quarters contribute to almost 90% of the business. That's where the impact of negative margins come in Q1 for EdTech business.
Okay. just to confirm, you're trying to say that on an overall basis or on an yearly basis, you see yourself doing, 30% growth in revenues and an EBITDA margin of 8%?
That's right. For EdTech segment, yeah.
For EdTech, yeah. Okay, thank you. Thanks, Ramani.
Thank you. The next question is on the line of Amit Chandra from HDFC Securities. Please go ahead.
Yeah, thanks for the opportunity. My first question is.
Mr. Chandra, your voice is not clear, sir. May we request you to use your handset, please?
Is it better now?
Yes, sir. Please, sir.
Yeah. Yeah. My first question is on the attrition in the general staffing business. Have you seen, I know, there is moderation on the attrition in the general staffing? If you can, you know, state how has been the cross-hiring there in the general staffing. Also in the DA business, X of the NIM impact, okay, so around, like, you know, 30,000 associates that we have X of NIM. How do you see that going, say, in the next 2 years? I know, if I'm not wrong, the composition there is very different from what we have in general staffing. There we are focusing more on the manufacturing side, you know, mostly on the PLI and the electronic manufacturing side. How do you see that growing over the next two years?
Amit, on the staffing front, attrition hasn't really reduced much. As a play out to various verticals that we cater to, attrition still stays high. I think the only way for us to get larger net growth is increasing the gross adds, and that is really what the focus has been. The element of roughly 13,000 headcount growth has come from increasing the gross adds as a combination of the hiring increases and the numbers that are coming from the customers. At this point, our view is that attrition is not something that we can address. We have to take it for what it is, and just focus on the gross additions.
That's something that we are kind of consciously driving, and I would say, the aspect of having taken the hiring gross adds to 19,000 and, you know, looking to increase that further as we go ahead, are all measures in that direction. From a DA perspective, we focus not just on manufacturing. We focus on manufacturing and services sectors as a customer base, and I think both of them are potentials for us to be addressing growth for the future. While NIM as a team, has a sunset and will see headcount reduction, other areas is really what we have been focusing on, and we have done client acquisition, we have started seeing the element of early growth.
Larger numbers will happen over a period of time, and which is why we believe that we will end the year on a more positive note for headcount in the DA business, and by which time we would also have exited NIM comprehensively, and hence we will only be looking at net adds thereafter. We will cater to both services and manufacturing in the DA sector.
Okay. In terms of the investment that you have already done, on this part of the year, and also, at what point, we can see, again, the investments coming back? I know, because, in the last one year, we have not seen, much in terms of pickup. I know at what point of associate, total associates, we are, invested in the business?
If you really look at it, I'm assuming you're referring to the investment in terms of the headcount increase choices we had made last year across businesses. Those have largely kind of been rationalized over the years and corrected to the capacities we believe we should run with. The view at this point, Amit, is that we hold the headcounts factoring for the growth that we see coming, there will not be a large headcount increase at the core level for this whole year. We will manage the growth on that. I think the earlier call-out that Ramani did in saying that, you know, the addition, especially if you look at staffing, without much of a headcount growth, should ideally start flowing to the bottom line.
I think that's a similar statement for most businesses, as we see it this year.
Okay. Thanks, and all the best for the future.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you.
Thank you very much. I think, as we had called out, some headwinds in businesses and seasonality have played out for quarter one, which has been to an extent compensated by the strong growth that we have seen on the staffing side. The core headcount rationalization and bandwidth prep for the current market situation is what we are at. We believe we will be able to sustain the growth for the year with the current headcounts and costs that we have, with marginal changes as we go forward.
Clearly, with the change in seasonality in the HRTech front and the continued growth projected with the current outlook in staffing, coupled with at least a stemming of the losses in the DA and the specialized staffing businesses, we should start seeing an absolute EBITDA improvement as we go forward. We expect no surprises, and we will stay focused on driving the growth into the coming quarters. Thank you.
Thank you very much, sir. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.